UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              FORM 10-K
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2003,
       or
[ ]   Transition Report Pursuant to Section 13 or 15(d) of
      the Securities Exchange Act of 1934
 For the transition period from            to

                    Commission file number 1-8496

                       COGNITRONICS CORPORATION
        (Exact name of registrant as specified in its charter)

                 NEW YORK                        13-1953544
    (State or other jurisdiction of           (I.R.S. Employer
     incorporation or organization)          Identification No.)

  3 Corporate Drive, Danbury, Connecticut            06810
 (Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code (203) 830-3400

Securities registered pursuant to Section 12(b) of the Act:

                          Name of each exchange      Shares Outstanding
Title of each class       on which registered        as of March 1, 2004

Common Stock, par value   American Stock Exchange           5,691,717
 $0.20 per share

Securities registered pursuant to Section 12(g) of the Act:     None

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for at least the
past 90 days. Yes   x      No

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K. [   ]

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act).  Yes              No x
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of the last business day of the
most recently completed second fiscal quarter was $9,530,000.

Documents incorporated by reference:  Portions of the Proxy
Statement for the annual meeting of stockholders to be held on May
13, 2004 are incorporated by reference into Parts II and III.





                          TABLE OF CONTENTS


                                PART I

Item                                                              Page

 1.   Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 5
 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 5
 4.   Submission of Matters to a Vote of Security Holders. . . . . . 5
      Executive Officers of the Company. . . . . . . . . . . . . . . 6


                               PART II

 5.   Market for Company's Common Equity and Related Stockholder
      Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 6.   Selected Financial Data. . . . . . . . . . . . . . . . . . . . 7
 7.   Management's Discussion and Analysis of Financial Condition
      and Results of Operations. . . . . . . . . . . . . . . . . . . 7
 7a.  Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . .11
 8.   Financial Statements and Supplementary Data. . . . . . . . . .12
 9.   Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure . . . . . . . . . . . . . . . . . . .27
 9a.  Controls and Procedures. . . . . . . . . . . . . . . . . . . .27


                               PART III

10.   Directors and Executive Officers of the Company. . . . . . . .29
11.   Executive Compensation . . . . . . . . . . . . . . . . . . . .29
12.   Security Ownership of Certain Beneficial Owners and Management29
13.   Certain Relationships and Related Transactions . . . . . . . .29
14.   Principal Accountant Fees and Services . . . . . . . . . . . .29


                               PART IV

15.   Exhibits, Financial Statements,  Schedules and Reports on Form
8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29












McIAS is a trademark of Cognitronics Corporation.


                                PART I

Item 1.    Business

      (a)  Cognitronics Corporation (the "Company") was incorporated
in January 1962 under the laws of the State of New York. The Company
designs, manufactures and markets voice processing systems.

 (b)  The Company operates in two segments of the voice processing
industry.  In the United States, the Company designs, manufactures
and sells equipment for use in telephone central offices.  In
Europe, the Company distributes equipment for use on customers'
premises.

 (c)  (i) A description of the fields of voice processing in which
the Company operates and its products are as follows:
Domestic Operations.   These products are sold directly to
telecommunication service providers, switch manufacturers, IP-based
communications systems manufacturers, systems integrators, and value
added resellers (VAR) who distribute the Company's products.

      Network Media Servers and Intelligent Announcers.  The Network
Media Servers, the Cognitronics Exchange (CX) Series, include a
total of four (4) models:  CX500, CX1000, CX3000 and CX4000.  This
family of products facilitates the deployment of voice resources in
service provider networks, both the traditional circuit-switched
networks as well as the next generation of packet-based networks.
The CX platforms provide greater capacity and increased
functionality with significantly better price performance.  Included
in the CX Series capabilities are a new set of Media Server Boards,
delivering the power of a media server within a single board.  CX
supports AIN protocols such as SR-3511, GR-1129CORE and ISDN-PRI.
The CX is also designed to interface with softswitches, media
gateways and application servers, supporting industry standard
protocols such as MGCP, RTP/RTCP and SIP.  Other protocols will be
supported as market demand dictates.

      Messaging Systems.  CX Messaging Systems provide voice mail,
unified messaging, and automated attendant functions to target
markets.  Capabilities include PSTN and IP interfaces, Voice XML
scripting language, scalable from a few hundred to more than a
million mailboxes, and may be configured for high availability
and/or redundant performance.

      Passive Announcers.  These announcers are used by the ILECs
and CLECs to inform callers about network conditions or procedures
to invoke the use of a service.  The Company has been a major
supplier to the industry of passive announcers and incorporates
these features in products such as the Model 688 Automatic Number
Announcer, McIAS 950, and the McIAS 16xx product family.

      Call Processors.  The Company's McIAS 950 is also an automated
attendant and audiotext system with the flexibility to offer the
caller various choices (dial an extension, revert to an operator,
etc.).  The system also offers a wide variety of menu-selected
information to callers.   The McIAS 950 is designed for use in both
telephone network environments and the commercial business market.

European Distributorship Operations.  Dacon Electronics Plc., based
in Hertfordshire, England, distributes call management and voice
processing products, including products manufactured by the Company,
in Europe.

       (ii)  Status of publicly announced new products or industry
segments requiring material investment.  Inapplicable.

       (iii)  The Company has adequate sources for obtaining raw
materials, components and supplies to meet production requirements
and did not experience difficulty during 2003 in obtaining such
materials, supplies and components.

      (iv)  The Company relies on technological expertise,
responsiveness to users' needs and innovations and believes that
these are of greater significance in its industry than patent
protection. There can be no assurance that patents owned or
controlled by others will not be encountered and asserted  against
the Company's voice processing products or that licenses or other
rights under such patents would be available, if needed. The Company
has registered trademarks and names which the Company considers
important in promoting the business of the Company and its products.

       (v)  Seasonality.   Inapplicable.

       (vi)  The discussion of liquidity and sources of capital as
set  forth in Management's Discussion and Analysis of Financial
Condition and Results of Operations is included in Item 7 of this
Annual Report on Form 10-K and is incorporated herein by reference.

      (vii) In 2003, revenues included sales of $2.8 million to
Verizon Communications Inc. and $1.1 million to Siemens Carrier
Networks LLC.  The Company's European operations had sales of $3.0
million to British Telecommunications Plc in 2003. Over the past
several years, a major portion of the revenues of the domestic
operations has come  from two or three large customers, and a
significant portion of the revenues of the European operations has
come from one customer.  Accordingly, the loss of any of these
customers could have a material adverse impact on the Company's
results of operations.

       (viii) The dollar amount of orders believed by the Company to
be firm as of December 31, 2003 and 2002, amounted to $.2 million
and  $.4 million, respectively. Substantially all of the orders as
of December 31, 2003, can reasonably be expected to be filled during
2004.

      (ix) Business subject to renegotiation.  Inapplicable.

       (x)  The Company competes, and expects to compete, in fields
noted for rapid technological advances and the frequent introduction
of new products and services. The Company's products are similar to
those manufactured, or capable of being manufactured, by a number of
companies, some of which are well-established corporations with
financial, personnel and technical resources  substantially larger
than those of the Company. The Company's ability to compete in the
future depends on its ability to maintain the technological and
performance advantages of its current products and to introduce new
products and applications that achieve market acceptance. Future
research and development expenditures will be based, in part, on
future results of operations. There are no assurances that the
Company will be able to successfully develop and market new products
and applications.

       (xi) Expenditures for research and development activities, as
determined in accordance with generally accepted accounting
principles, amounted to $2.6 million in 2003, $3.3 million in 2002
and $3.6 million in 2001.  In addition, the estimated dollar amount
spent on the improvement of existing products or techniques was $.1
million in 2003 and 2001.

       (xii) Material effects of compliance with Federal, State or
local provisions regulating the discharge of materials into the
environment or otherwise relating to the protection of the
environment.     Inapplicable.

      (xiii) At December 31, 2003, the Company and its subsidiaries
employed 70 people.

 (d)  Sales to foreign customers primarily represent sales of Dacon
Electronics Plc. (incorporated in the United Kingdom) of $5.1
million in 2003, $5.8 million in 2002 and $5.9 million in 2001.
Additional information about foreign operations is included in Note
N to Consolidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K and is incorporated herein by reference.

      Further, there were export-type sales (primarily North
America) of  approximately $.1 million in 2003, 2002 and 2001.
Export sales do not involve any greater business risks than do sales
to domestic customers and, in certain instances, the Company obtains
an irrevocable letter of credit or payment prior to shipment of
products to the customer.  Selling prices and gross profit margins
on export-type sales are comparable to sales to domestic customers.


Item 2.   Properties

       The facilities of the Company and its subsidiaries are
located as follows:
                                                SQUARE   LEASE EXPIRATION
      LOCATION             DESCRIPTION           FEET          DATE
--------------------  ----------------------    ------   ----------------
Danbury, Connecticut  Office, engineering,      27,600       10/31/08
3 Corporate Drive     production and service
                      facility

Hemel Hempstead       Office, distribution      12,000        7/31/06
Hertfordshire,        and service facility
United Kingdom
1 Enterprise Way

      The Company considers each of these facilities to be in good
condition and adequate for the Company's business.

Item 3.   Legal Proceedings

      There are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or of which any of
their property is the subject.

Item 4.   Submission of Matters to a Vote of Security Holders

      Inapplicable.

                  Executive Officers of the Company

The executive officers of the Company, their positions with the
Company and ages as of March 1, 2004 are as follows:

      NAME                  POSITION(S) AND OFFICE(S)               AGE
-----------------         -----------------------------             ---
Brian J. Kelley           President and Chief Executive              52
                          Officer; Director
Kenneth G. Brix           Vice President                             57
Harold F. Mayer           Secretary                                  74
Michael N. Keefe          Vice President                             48
Roy A. Strutt             Vice President                             47
Garrett Sullivan          Treasurer and Chief Financial              58
                          Officer
Emmanuel A. Zizzo         Vice President                             63

      No family relationships exist between the executive officers
of the Company. Each of the executive officers was elected to serve
until the next  annual meeting of the Board of Directors or until
his successor shall have been elected and qualified.

      Mr. Kelley has been President and Chief Executive Officer of
the Company since 1994. Prior to that he held senior management
positions with TIE/Communications, Inc. from 1986 to 1994.

      Mr. Brix has been  a Vice President of the Company since 1994
with responsibility for U.S. sales and marketing. Prior to that he
held senior sales management positions from 1987 to 1994.

      Mr. Mayer has been Secretary of the Company since 1975. He was
Treasurer from 1974 to 1989 and a Vice President of the Company from
1986 to 1996.

      Mr. Keefe has been a Vice President of the Company since 1993
with responsibility for engineering, prior to which he was Manager
of Software Planning and Development from 1992 until 1993 and senior
engineer for more than five years. He has been employed by the
Company since 1980.

      Mr. Strutt has been a Vice President of the Company since 1994
with responsibility for European operations. Since 1992, he has been
Managing Director of Dacon Electronics Plc, which was acquired by
the Company in 1992.

      Mr. Sullivan has been Treasurer and Chief Financial Officer of
the Company since 1989.

      Mr. Zizzo has been a Vice President of the Company since 1995
with responsibility for operations, primarily manufacturing,
purchasing and physical facilities, prior to which he had been
Director of Operations since 1994.





                               PART II

Item 5.   Market for Company's Common Equity and Related Stockholder
Matters

 (a) and (b) Cognitronics' Common Stock is traded on the American
Stock Exchange under the symbol CGN. On March 1, 2004, there were
557 stockholders of record; the Company estimates that the total
number of beneficial owners was approximately  2,300.  Information
on quarterly stock prices is set forth in Item 8 of this Annual
Report on Form 10-K and is incorporated herein by reference.

 (c) The Company has never paid a cash dividend on its Common Stock
and has used its cash for the development of its business.  In 1998,
2000 and 2001, the Company announced its intention to repurchase up
to 300,000, 200,000 and 500,000 shares, respectively, of its Common
Stock.  The Company repurchased 150 shares of its Common Stock  in
1998, 105,750 in 1999, 331,000 in 2000, 307,808 in 2001 and 1,500 in
2002.  The Company has no present intention of paying a cash
dividend and payment of any future dividends will depend upon the
Company's earnings, financial condition and other relevant factors.

         (d) The equity compensation plan information set forth
under the caption Equity Compensation Plan Information in the Proxy
Statement for the annual meeting of stockholders to be held May 13,
2004 is incorporated herein by reference.

Item 6.  Selected Financial Data
                                      Year ended December 31,
                                  (in thousands except per share)
OPERATING RESULTS            2003      2002      2001      2000      1999
                             ----      ----      ----      ----      ----
Revenues                  $10,257   $11,299   $18,875   $31,836   $31,693
Net income (loss)          (3,550)   (6,444)   (1,805)    4,530     5,346
Net income (loss)
 per share
         Basic              $(.63)   $(1.18)    $(.33)     $.79      $.94
         Diluted             (.63)    (1.18)     (.33)      .74       .88

Weighted average number of
basic shares outstanding    5,615     5,438     5,417     5,754     5,670
Weighted average number of
diluted shares outstanding  5,615     5,438     5,417     6,092     6,048

FINANCIAL POSITION

Working capital           $14,143   $17,789   $22,754   $26,107   $24,130
Total assets               18,898    22,812    28,573    32,998    35,102
Stockholders' equity       14,224    17,334    23,598    26,988    25,729
Stockholders' equity
 per share                  $2.51     $3.12     $4.36     $4.85     $4.40
Cash dividends paid          None      None      None      None      None

Included in 2002 is an inventory provision of $951,000 ($.11 per
basic and diluted share) and provisions for impairment of fixed
assets of $275,000 ($.03 per basic and diluted share) and an
increase in the deferred tax valuation allowance of $2,425,000 ($.44
per basic and diluted share).

Net (loss) in 2003 and 2002 did not include amortization of goodwill
of $332,000 ($.05 per basic and diluted share).  This expense was
included in all other years presented.

Included in 2001 is an inventory provision of $510,000 ($.07 per
basic and diluted share) and a tax benefit due to an adjustment to
the tax provision of $155,000 ($.03 per basic and diluted share).

Included in 2000 is a tax benefit due to an adjustment to the tax
provision of $156,000 ($.03 per basic and diluted share).

The above Selected Financial Data should be read in conjunction with
the Consolidated Financial Statements of the Company, including the
notes thereto, and the unaudited quarterly financial data included
in Item 8 of this Annual Report on Form 10-K.

Item 7.  Management's Discussion and Analysis of Financial Condition
and Results of Operations

Certain Factors That May Affect Future Results

     The following information, including, without limitations, the
Quantitative and Qualitative Disclosures About Market Risk that are
not historical facts, may be forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Act of 1934. These statements generally are
characterized by the use of terms such as "believe," "expect" and
"may."  Although the Company believes that the expectations
reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ
materially from those set forth in forward-looking statements.
Factors that might cause such a difference include:

       Product demand fluctuations in the timing and volume of
customer requests for its products.

       Telecommunication systems industry and general economic
conditions.

       Competitive pressure on selling prices.

       Market acceptance of the Company's products and its
customer's products and services.

           Costs associated with possible litigation or settlement,
           including those related to the use or ownership of
           intellectual property.

           Loss of a major customer.  A few customers account for a
           major portion of the Company sales.  A loss of such a
           customer would have a major adverse impact on the
           Company's results.

           Third party suppliers increase the risk that the Company may
           not have adequate supply to meet demand.

           Introduction of new products.  The Company's markets are
           subject to technological change, so its success depends
           on its ability to develop and introduce new products.

           The markets in which the Company competes are highly
           competitive.  Some of its competitors have significantly
           greater financial and other resources.

           The Company's future success is dependent on its ability
           to attract and retain key design engineering, sales and
           executive personnel.  There is intense competition for
           qualified personnel, in particular, design engineers, and
           the Company may not be able to attract and retain
           engineers and other qualified personnel necessary for the
           development and introduction of new products or to
           replace engineers or other qualified personnel that may
           leave its employ.

           Expense levels, in the short term, are fixed.  Sales
           variances from quarter to quarter would have a
           significant effect on the results of operations.

           Other risk factors detailed in this Annual Report on Form
           10-K and in the Company's other Securities and Exchange
           Commission filings.

       Given the uncertainties, the Company cautions readers not to
place undue reliance on such statements.

Results

         The Company reported net losses of $3.5 million, $6.4
million and $1.8 million in 2003,2002 and 2001, respectively.

         In 2003, sales decreased $1 million (9%) from 2002.  The
sales of the Company's domestic operations declined $.4 million
(8%).  The decrease in sales was in both the direct and indirect
channels with the exception of sales of CX4000 to a large domestic
telecommunication service provider.  Sales to this customer
increased $1.2 million in 2003 from the prior year.  The UK
distributorship operation decreased $.6 million (10%) in 2003 from
the prior year, in spite of a favorable foreign currency fluctuation
of 8%.  In addition, sales to its largest customer increased in 2003
from 2002.  Decreases in sales to its other customers more than
offset these improvements.  The Company's backlog at December 31,
2003 was $.2 million versus $.4 million in 2002.  In both 2003 and
2002, a major portion of the Company's domestic revenue came from
two customers and a significant portion of the UK distributorship's
revenue came from one customer.  The loss of any of these customers
would have a material adverse impact on the Company.

         In 2002, sales declined $7.6 million (40%) from 2001.  The
sales of the Company's domestic operations declined $7.4 million
(57%).  This decrease was primarily in the indirect channel and
reflects significant reduction in capital spending by
telecommunication companies.  The UK distributorship operations'
sales decreased $.1 million (2%).

         Consolidated gross margin was 41% in 2003, 28% in 2002 and
44% in 2001.  Included in cost of products sold were inventory
obsolescence charges of $.4 million in 2003, fixed asset impairment
and inventory obsolescence charges of $1.2 million in 2002, and
inventory obsolescence charges of $.5 million in 2001.

         Research and development decreased $.7 million (21%) in
2003 and $.3 million (9%) in 2002 from the prior year.  The decrease
in 2003 primarily reflects lower contract engineering services and
lower personnel cost.  The decrease in 2002 reflects lower material
costs and recruiting expenses.

         Selling, general and administrative expense decreased $.1
million (1%) in 2003 and $1.2 million (16%) in 2002 from the prior
year .  The decrease in 2003 was due to a $.4 million (10%) decrease
in the US operations primarily reflecting lower personnel costs
offset by an increase of $.3 million (11%) in the UK primarily
reflecting exchange rate variance.  The decrease in 2002 was due to
a $.4 million (10%) decrease in the US reflecting lower commissions
and bonuses and a decrease of $.8 million (23%) in the UK reflecting
personnel cost reductions.

         Other income of $1 million in 2003 includes a non-cash gain
of $.8 million on the termination of the Company's postretirement
health benefit plan.  The remaining other income of $.2 million in
2003, $.2 million in 2002 and $.5 million in 2001 is primarily
interest income.  The decrease in 2002 from 2001 is primarily due to
lower interest rates and lower average invested balances.

         The Company's effective tax rate for 2003 was (0.2%) versus
6% for 2002 and (30%) for 2001.  Included in the 2002 tax expense is
a $2,425,000 increase in the deferred tax valuation allowance.
Forming a conclusion that such an allowance is not needed is difficult
when there is evidence such as cumulative losses in recent years.
Included in the effective tax rate in 2001 is a favorable adjustment
of $155,000 to the tax provision attributable to actual amounts
differing from previously recorded estimates.  The provision for
income taxes is discussed in Note H to the Consolidated Financial
Statements.

         The effect of inflation has not had a significant impact on
the operating results of the Company over the past few years.
Technological advances and productivity improvements are continually
being applied to reduce costs, thus reducing inflationary pressures
on the operating results of the Company.

         Exchange rate changes will impact the reported dollar sales
and cost of sales of the Company's UK distributorship operations.
In addition, at December 31, 2003, the Company's UK distributorship
operations had net assets of $1.4 million, which would be impacted
by changes in foreign exchange rates.  However, the impact of such
rate change would be reflected in the translation adjustment
recorded in the equity section of the balance sheet.  The Company
does not hedge this foreign currency net asset exposure.

         Total rental expense amounted to $364,000 in 2003, $423,000
in 2002 and $472,000 in 2001.  Future annual payments for long-term
noncancellable leases for each of the five years in the period
ending December 31, 2008 are approximately
$444,000, $425,000, $304,000, $182,000 and $152,000, respectively,
and $0 thereafter.

Off-Balance Sheet Arrangements

         None.

Liquidity and Sources of Capital

         Net cash used by operations was $2.1 million in 2003,
$2.0 million in 2002  and net cash provided by operations was
$4.2 million in 2001.  The use of cash by operations in 2003 and
2002 versus cash provided by operations in 2001 is reflective of
the increase in net loss.  Cash (used) provided by investing
activities was $2.2 million in 2003, ($2.9) million in 2002 and
$1.8 million in 2001.  The Company had net sales of marketable
securities of $2.4 million in 2003 and $3.0 million in 2001 versus
net purchases of marketable securities of $2.0 million in 2002.
There were purchases of property, plant and equipment and software
of $.2 million, $.6 million and $.9 million in  2003, 2002 and 2001,
respectively.  Included in 2002 and 2001 were loans to officers, net
of repayments, of $.3 million and $.4 million , respectively.  Cash
used by financing activities of $1.7 million in 2001 primarily
relates to the repurchase of the Company's common stock.

      Working capital decreased to $14.1 million at December 31,
2003 from $17.8 million at December 31, 2002 and $22.8 million at
December 31, 2001.  The ratio of current assets to current
liabilities was 5.4:1 at December 31, 2003 versus 6.8:1 at December
31, 2002 and 9.6:1 at December 31, 2001.  The decreases in working
capital in 2003 and 2002 from the prior year is due to the results
of operations.

         The Company's contractual obligations are as follows (amounts
in thousands):
                                          Payments due by period
                                       Less                     More
                                       Than 1   1 - 3   3 - 5   Than 5
      Contactual Obligation    Total   Year     Years   Years   Years
      ---------------------    -----   ------   -----   -----   ------
      Operating Leases        $1,503     $440    $729    $334       $0


         The Company anticipates making capital expenditures of
approximately $.5 million, maintaining the current level of
expenditures for  research and development and may repurchase up to
253,792 shares of its Common Stock in 2004.  Management believes
that the cash and cash equivalents  at December 31, 2003 and the
cash flow, if any, from operations will be sufficient to meet its
short-term and long-term needs.

Assumptions and Estimates Used in Critical Accounting Policies

      In the preparation of the financial statements in conformity
with accounting principles generally accepted in the United States,
management must make critical decisions regarding accounting
policies and judgments regarding their application.  Materially
different amounts could be reported under different circumstances
and conditions.

      Revenue

       Revenue is recognized when earned.  The Company generally
      recognizes revenue from product sales upon shipment and in
      certain circumstances upon acceptance by the customers.

      Inventories - Slow-moving and Obsolescence

       In 2003 and 2002, due to a prolonged slow-down in spending by
      telecommunication service providers, inventory turnover has
      slowed.  The Company recorded charges of $.4 million and $1
      million 2003 and 2002 to reduce its carrying value of
      inventory to the lower of cost or market.  If future capital
      expenditures by telecommunication service providers do not
      increase or decrease further, additional charges may be required.

      Deferred Tax Assets

       As of December 31, 2003, the Company has a valuation
      allowance of $4.0 million for net deferred tax assets.  In
      making such a determination, the Company considers its current
      and past performance, the market environment in which it
      operates, estimated future earnings, tax planning strategies
      and other factors.  In the future, as these factors change, a
      change in the valuation reserve may be required.

      Pensions

       The Company accounts for its defined benefit pension plans in
      accordance with SFAS No. 87, "Employers' Accounting for
      Pensions" which requires that amounts recognized in financial
      statements be determined on an actuarial basis.

       The most significant element in determining the Company's
      pension income (expense) in accordance with SFAS No. 87 is the
      expected return on plan assets.  The Company has assumed that
      the expected long-term rate of return on plan assets will be
      6.5%.  Over the long term, the Company's pension plan assets
      have earned in excess of 6.5%; therefore, the Company believes
      that its assumption of future returns of 6.5% is reasonable.
      The assumed long-term rate of return on assets is applied to
      the value of plan assets.  This produces the expected return
      on plan assets that is included in pension income (expense).
      The difference between this expected return and the actual
      return on plan assets is deferred.  The net deferral of gains
      (losses) are amortized to expense in accordance with SFAS No.
      87.  The plan assets earned a rate of return in excess of the
      assumed rate of return in 2003 and less than the assumed rate
      of return in 2002.

      At the end of each year, the Company determines the discount
rate to be used to discount plan liabilities.  The discount rate
reflects the current rate at which the pension liabilities could be
effectively settled at the end of the year.  At December
31, 2003, the Company used a rate of 6.25%.  Changes in discount
rates over the past three years have not materially affected pension
income (expense), and the net effect of changes in the discount
rate, as well as the net effect of other changes in actuarial
assumptions and experience, have been deferred as allowed by SFAS
No. 87.



Item 7.a  Market Risk

      The Company does not use derivative financial instruments.
The Company's marketable securities consist of short-term and/or
variable rate instruments and therefore a change in interest rates
would not have a material impact on the value of these securities.

Item 8.  Financial Statements and Supplementary Data

                 QUARTERLY FINANCIAL DATA (UNAUDITED)
               (in thousands except per share amounts)
2003                     First      Second       Third     Fourth
                         -----      ------       -----     ------
Sales                   $2,496      $2,448      $3,498     $1,815
Gross profit               918         990       1,860        428
Net loss                (1,325)       (326)       (466)    (1,433)
Net loss per share:
      Basic              $(.24)      $(.06)      $(.08)     $(.25)
      Diluted             (.24)       (.06)       (.08)      (.25)

Common Stock price range:
      High               $2.95       $2.50       $2.45      $3.97
      Low                 1.41        1.30        1.85      $2.15

2002                     First      Second       Third     Fourth

Sales                   $3,142      $3,356      $2,378     $2,423
Gross profit             1,203       1,467         392        126
Net loss                  (813)       (616)     (1,251)    (3,764)
Net loss per share:
      Basic              $(.15)      $(.11)      $(.23)     $(.69)
      Diluted             (.15)       (.11)       (.23)      (.69)

Common Stock price range:
      High               $5.00       $3.65       $2.76      $2.75
      Low                 3.20        2.71        1.30       1.36

      The gross margin percentage for the fourth quarter of 2003 was
24% versus 45% for the first nine months of 2003 primarily due to
lower volume and lower absorption of overhead. The gross margin
percentage in the fourth quarter of 2002 was 5% versus 34% for the
nine months ended September 30, 2002 primarily due to increased
provisions for inventory obsolescence and provisions for fixed
assets impairment.

      Included in the second quarter of 2003 was a non-cash gain of
$834,000 due to the termination of the Company's postretirement
health benefits plan.

      Included in the third quarter of 2003 was an expense of
$220,000 for the estimated settlement of a rent dispute in the UK
distributorship operations.  Due to the satisfactory resolution of
the company's claim against a third party, this amount was reversed
in the fourth quarter.

      The effective tax rates for the fourth quarter of 2002 was 95%
versus the estimated effective rate of (35.1%) for the first nine
months of 2002.  Included in the fourth quarter of 2002 tax
provision is an increase in the deferred tax asset valuation
allowance of $2,425,000.

      The above financial information should be read in conjunction
with the Consolidated Financial Statements, including the notes
thereto.
























                    Report of Independent Auditors

Stockholders and Board of Directors
Cognitronics Corporation

We have audited the consolidated balance sheet of Cognitronics
Corporation and Subsidiaries (the Company) as of December 31, 2003,
and the related consolidated statements of operations and
comprehensive income (loss), stockholders' equity, and cash flows
for the year then ended.  These consolidated financial statements
are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.  We did not audit the
financial statements of Dacon PLC, a wholly owned subsidiary.  Those
financial statements were audited by other auditors, whose report
has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Dacon PLC, is based solely on the report of
the other auditors.

We conducted our audit in accordance with auditing standards
generally accepted in the United States of America.  Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are
free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit and the report of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Cognitronics Corporation as of December 31, 2003, and the
consolidated results of their operations and their cash flows for
the year then ended in conformity with accounting principles
generally accepted in the United States of America.




                                  /s/ CARLIN, CHARRON & ROSEN, LLP



Glastonbury, Connecticut
March 3, 2004












                    Report of Independent Auditors

Stockholders and Board of Directors
Cognitronics Corporation

We have audited the accompanying consolidated balance sheet of
Cognitronics Corporation and subsidiaries as of December 31, 2002,
and the related consolidated statements of operations and
comprehensive loss, stockholders' equity, and cash flows for each of
the two years in the period ended December 31, 2002.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Cognitronics Corporation and subsidiaries at December
31, 2002, and the consolidated results of their operations and their
cash flows for each of the two years in the period ended December
31, 2002, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note A to the consolidated financial statements,
Cognitronics Corporation changed its method of accounting for
goodwill and intangible assets, effective January 1, 2002.

                                              /s/ ERNST & YOUNG LLP

Stamford, Connecticut
March 7, 2003
















CONSOLIDATED BALANCE SHEETS
COGNITRONICS CORPORATION AND SUBSIDIARIES
(dollars in thousands)
                                                          December 31,
                                                         2003     2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents                             $ 2,877  $ 2,732
Marketable securities                                   5,956    8,387
Accounts receivable, less allowances of $63 and $68     1,183    2,038
Inventories                                             2,987    3,687
Tax recoverable                                         2,028    2,028
Other current assets, including loans to
 officers of $1,931 and $1,906                          2,312    1,982
                                                      -------  -------
       TOTAL CURRENT ASSETS                            17,343   20,854

PROPERTY, PLANT AND EQUIPMENT, net                      1,087    1,315
GOODWILL                                                  319      319
OTHER ASSETS, less amortization of $217 and $533          149      324
                                                      -------  -------
                                                      $18,898  $22,812
                                                      =======  =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable                                      $   778  $   952
Accrued compensation and benefits                       1,297    1,252
Current maturities of debt                                          26
Other accrued expenses                                  1,125      835
                                                      -------  -------
       TOTAL CURRENT LIABILITIES                        3,200    3,065


OTHER NON-CURRENT LIABILITIES                           1,474    2,413


COMMITMENTS AND CONTINGENCIES (Note J)

STOCKHOLDERS' EQUITY
Common Stock, par value $.20 a share; authorized
 20,000,000 shares; issued 5,863,229 shares             1,173    1,173
Additional paid-in capital                             11,750   12,374
Retained earnings                                       3,419    6,969
Cumulative other comprehensive loss                       (98)    (298)
Unearned compensation                                    (509)    (512)
                                                      -------  -------
                                                       15,735   19,706
Less cost of 190,431 and 298,988 common shares
 in treasury                                           (1,511)  (2,372)
                                                      -------  -------
       TOTAL STOCKHOLDERS' EQUITY                      14,224   17,334
                                                      -------  -------
                                                      $18,898  $22,812
                                                      =======  =======


The accompanying notes to consolidated financial statements are an
integral part of these statements.



CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
COGNITRONICS CORPORATION AND SUBSIDIARIES
(in thousands except per share data)
                                               Year ended December 31,
                                             2003      2002      2001
                                             ----      ----      ----
SALES                                     $10,257   $11,299   $18,875
COSTS AND EXPENSES
 Cost of products sold                      6,061     8,111    10,656
 Research and development                   2,619     3,300     3,631
 Selling, general and administrative        6,071     6,153     7,325
 Amortization of goodwill                                         332
 Other (income) expense, net               (1,007)     (206)     (504)
                                          -------   -------   -------
                                           13,744    17,358    21,440
                                          -------   -------   -------
      Loss before income taxes             (3,487)   (6,059)   (2,565)
PROVISION (BENEFIT) FOR INCOME TAXES           63       385      (760)
                                          -------   -------   -------
NET LOSS                                   (3,550)   (6,444)   (1,805)

      Currency translation adjustment
       and minimum pension liability          200       (38)      (78)
                                          -------   -------   -------
COMPREHENSIVE LOSS                        $(3,350)  $(6,482)  $(1,883)
                                          =======   =======   =======
NET LOSS PER SHARE:
      Basic                                 $(.63)   $(1.18)    $(.33)
      Diluted                                (.63)    (1.18)     (.33)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2001, 2002 and 2003
(dollars in thousands)
<TABLE>
                                    Common Stock   Additional            Compre-   Unearned    Treasury
                                   Shares           Paid-In    Retained  hensive   Compensa-    Shares
                                   Issued  Amount   Capital    Earnings   (Loss)     tion       Amount
<S>                            <C>        <C>        <C>       <C>       <C>         <C>      <C>
Balance at January 1, 2001      5,863,229  $1,173     $14,123   $15,218   $(182)      $(332)   $(3,012)
Shares issued pursuant to
      employee stock plans                               (799)                         (174)     1,386
Shares issued to directors                                 (2)                                       7
Repurchase of common shares                                                                     (1,925)
Currency translation adjustment                                              (1)
Minimum pension liability
   net of tax of $44                                                        (77)
Net loss                                                         (1,805)
                                ---------  ------     -------   -------   -----       -----    -------
Balance at December 31, 2001    5,863,229   1,173      13,322    13,413    (260)       (506)    (3,544)
Shares issued pursuant to
      employee stock plans                               (925)                           (6)     1,150
Shares issued to directors                                (23)                                      27
Repurchase of common shares                                                                         (5)
Currency translation adjustment                                             104
Minimum pension liability
   net of tax of $85                                                       (142)
Net loss                                                         (6,444)
                                ---------  ------     -------   -------   -----       -----    -------
Balance at December 31, 2002    5,863,229   1,173      12,374     6,969    (298)       (512)    (2,372)
Shares issued pursuant to
      employee stock plans                               (610)                            3        842
Shares issued to directors                                (14)                                      19
Currency translation adjustment                                             129
Minimum pension liability                                                    71
Net loss                                                         (3,550)
                                ---------  ------     -------    ------    ----       -----    -------
Balance at December 31, 2003    5,863,229  $1,173     $11,750    $3,419    $(98)      $(509)   $(1,511)
                                =========  ======     =======    ======    ====       =====    =======
</TABLE>The accompanying notes to consolidated financial statements are an
integral part of these statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
COGNITRONICS CORPORATION AND SUBSIDIARIES
(dollars in thousands)

                                               Year ended  December 31,
                                                2003     2002     2001
                                                ----     ----     ----
OPERATING ACTIVITIES
 Net loss                                    $(3,550) $(6,444) $(1,805)
 Adjustments to reconcile net loss to net
 cash (used) provided by operating activities:
   Income tax expense (benefit)                   63      385     (760)
   Depreciation and amortization                 612      743      987
   Loss on disposition of assets                   9       36       13
   Shares issued as compensation                 228      219      206

     Net (increase) decrease in:
      Accounts receivable                        961       88    5,727
      Inventories                                778    2,063      876
      Other assets                              (329)     723       26

     Net increase (decrease) in:
      Accounts payable                          (255)      10     (695)
      Accrued compensation and benefits         (821)      14     (151)
      Other accrued expenses                     253      167     (116)
                                             -------  -------  -------
                                              (2,051)  (1,996)   4,308
            Income taxes paid                    (60)     (40)    (121)
                                             -------  -------  -------
            NET CASH (USED) PROVIDED BY
            OPERATING ACTIVITIES              (2,111)  (2,036)   4,187
                                             -------  -------  -------
INVESTING ACTIVITIES
 Purchase of marketable securities            (5,713) (16,071)  (5,500)
 Sale of marketable securities                 8,144   14,104    8,500
 Loans to officers, net                                  (341)    (357)
 Proceeds from disposition of assets                                14
 Additions to property, plant and equipment     (170)    (617)    (656)
 Purchase of software licenses                   (36)      (6)    (230)
                                             -------  -------  -------
            NET CASH (USED) PROVIDED BY
            INVESTING ACTIVITIES               2,225   (2,931)   1,771
                                             -------  -------  -------

FINANCING ACTIVITIES
 Principal payments on debt                      (26)     (46)     (52)
 Proceeds from debt                                                 34
 Shares issued pursuant to stock plans            10        5      213
 Shares repurchased for treasury,
  1,500 and 307,808                                        (5)  (1,926)
                                             -------  -------  -------
            NET CASH USED BY
            FINANCING ACTIVITIES                 (16)     (46)  (1,731)
                                             -------  -------  -------
EFFECT OF EXCHANGE RATE DIFFERENCES               47       14        5
                                             -------  -------  -------
INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                     145   (4,999)   4,232

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR  2,732    7,731    3,499
                                             -------  -------  -------
CASH AND CASH EQUIVALENTS - END OF YEAR       $2,877   $2,732   $7,731
                                              ======   ======   ======
The accompanying notes to consolidated financial statements are an
integral part of these statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COGNITRONICS CORPORATION AND SUBSIDIARIES


NOTE A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization.  The Company designs, manufactures and markets voice
processing products in the United States and, through a subsidiary,
distributes call management and voice processing equipment in Europe.

Risks and Uncertainties.  A major portion of the Company's domestic
revenues is generated by sales to two customers, and a significant
portion of its European distributorship revenue comes from one
customer.  The loss of any of these customers would have a material
adverse impact on the Company. The Company's receivables are
primarily from major, well-established companies in the
telecommunications industry, and at December 31, 2003, two  such
companies accounted for 15% and 14%, respectively, of the Company's
accounts receivable.  The Company's markets are subject to rapid
technological change and frequent introduction of new products. The
Company's products are similar to those manufactured, or capable of
being manufactured, by a number of companies, some of which are well
established with financial, personnel and technical resources
substantially larger than those of the Company. The Company's
ability to compete in the future depends on its ability to maintain
the technological and performance advantages of its current products
and to introduce new products and applications that achieve market
acceptance.

Principles of Consolidation.  The financial statements include the
accounts of the Company and its subsidiaries, all of which are
wholly-owned. Intercompany accounts and transactions have been
eliminated in consolidation.

Revenue.  Revenue is recognized when earned.  The Company generally
recognizes revenue from product sales upon shipment and in certain
instances upon acceptance by the customer.

Use of Estimates.  The preparation of the financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Fair Value of Financial Instruments.  The carrying amounts of the
Company's financial instruments (trade receivables/payables and
other short-term and long-term debt) due to their terms and
maturities approximate fair value.

Cash and Cash Equivalents.  The Company considers financial
instruments with a maturity of three months or less from the date of
purchase to be cash equivalents. At December 31, 2003, essentially
all of the Company's cash and cash equivalent balances were with two
financial institutions.

Marketable Securities.  Marketable securities are classified as
available for sale and are reported at fair value which approximates
amortized cost.  They are comprised of investments in municipal bond
funds and high grade corporate debt and equity securities.  The
maturities are short term or have reset provisions.

Inventories.  Inventories are stated at the lower of cost (first-in,
first-out method) or market.

Property, Plant and Equipment.  Property, plant and equipment is
carried at cost less allowances for depreciation, computed in
accordance with the straight-line method based on estimated useful
lives.  The estimated lives for machinery and equipment are 5 to 12
years and for furniture and fixtures are 4 to 10 years.  Repairs and
maintenance are expensed when incurred.

Foreign Exchange.  The functional currency of the Company's foreign
subsidiary, the European distributorship operations, is the Pound
Sterling.  Results of operations for the Company's foreign
subsidiary were  translated from Pounds Sterling into U.S. dollars
using average exchange rates during the period, while assets and
liabilities were translated using current rates at the end of the
period.  The difference from historical exchange rates are recorded
as comprehensive income (loss) and are included as a component of
cumulative other comprehensive loss.

Income Taxes.  Income taxes are provided on all revenue and expense
items included in the consolidated statement of operations,
regardless of the period in which such items are recognized for
income tax purposes, adjusted for items representing permanent
differences between pretax accounting income and taxable income.
Deferred income taxes result from the future tax consequences
associated with temporary differences between the carrying amounts
of assets and liabilities for tax and financial reporting purposes.
A valuation allowance is provided to the extent the Company cannot
determine that the ultimate realization of net deferred tax assets
is more likely than not.

Stock Based Compensation. The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to
the fair value at the date of grant. The Company  accounts for stock
option grants in accordance with Accounting Principles Board ("APB")
 Opinion No. 25, "Accounting for Stock Issued to Employees", and
therefore recognizes no compensation expense for stock options granted.

If the Company had elected to recognize compensation expense for the
1990 Stock Option Plan and the 1967 Stock Purchase Plan based on the
fair value at the grant date , consistent with the method presented
by Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation", as amended, the pro forma
net loss and net loss per share would be as follows (in thousands
except per share information):
                                               2003      2002      2001
                                               ----      ----      ----
 Net loss       As reported                 $(3,550)  $(6,444)  $(1,805)
                Stock-based
                 Compensation Expense           389       331       642
                                            -------   -------    ------
                Pro forma                   $(3,939)  $(6,775)  $(2,447)
                                            =======   =======   =======
 Net loss per share
                As reported     Basic         $(.63)   $(1.18)    $(.33)
                                              =====    ======     =====
                                Diluted       $(.63)   $(1.18)    $(.33)
                                              =====    ======     =====
                As reported     Basic         $(.70)   $(1.25)    $(.45)
                                              =====    ======     =====
                                Diluted       $(.70)   $(1.25)    $(.45)
                                              =====    ======     =====

The estimated weighted average fair value per share of stock options
granted were $1.49, $1.01 and $5.07 for 2003,2002 and 2001,
respectively.  The fair value for the stock options was estimated at
the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 2003, 2002 and 2001,
respectively: risk-free interest rates of 2.2%, 2.28% and 4.75%; no
dividend yields; volatility factors of the expected market price of
the Company's common stock of .67 in 2003, .61 in 2002 and.70 in
2001; and a weighted average expected life of the option of 7.5
years in 2003, 2002 and 2001 for the Option Plan and 5 years for the
Directors' Option Plan.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility.  Because the
Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide
a reliable single measure of the fair value of its stock options.

Income (Loss) Per Share.  In computing basic earnings (loss) per
share, the dilutive effect of stock options and warrants are
excluded, whereas for diluted earnings per share they are included.
The shares used in both the basic and diluted earnings per share
calculations were 5,614,825, 5,438,126 and 5,416,729 for 2003, 2002
and 2001, respectively.

Goodwill.  The Company has classified as goodwill the cost in excess
of fair value of the net assets of companies acquired in purchase
transactions. Through December 31, 2001 goodwill was amortized using
the straight-line method over its estimated useful life (10 years).
Goodwill and other long-lived assets were reviewed for impairment
whenever events such as product discontinuances, plant closures,
product dispositions or other changes in circumstances indicate that
the carrying amount may not be recoverable.

Effective January 1, 2002, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets".  Under SFAS No. 142,
goodwill is no longer amortized, rather it is subject to a periodic
impairment test based on its fair value.  The Company performed the
transitional goodwill impairment test (as of January 1, 2002) and
the annual impairment test for the following years at December 31 on
the applicable reporting unit.  As the estimated fair value of this
reporting unit exceeded its net book value including goodwill, no
impairment charge was recognized.  If  SFAS No.142 was effective as
of January 1, 2001, then, for 2001, the reported net loss of
$(1,805,000) would have decreased by $305,000 to $(1,500,000),
adjusted for the exclusion of goodwill amortization, net of tax
effect.  Reported basic and diluted loss per share of $(.33) would
have decreased by $.05 to ($.28) per share.

New Accounting Standards.  The Financial Accounting Standards Board
issued Statements of Financial Accounting Standards (SFAS) Nos. 146,
"Accounting for Costs Associated with Exit or Disposal Activities",
149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities", and 150, "Accounting for Certain Financial
Instruments with Characteristics of  Both Liabilities and Equity".
The FASB also issued Interpretations 45 "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" and 46 "Consolidation of
Variable Interest Entities".  The Company is not impacted by these
Statements and Interpretations and does not expect their
implementation to have a material impact on the company's
consolidated financial statements.

In December 2003, the FASB issued SFAS No. 132 (revised 2003),
"Employers' Disclosures about Pensions and Other Postretirement
Benefits an amendment of FASB Statements No. 87, 88 and 106" which
requires additional disclosures about the assets, obligations, cash
flows and net periodic pension cost of defined benefit pension plans
and other defined postretirement benefit plans.  The Company adopted
the disclosure requirements under the SFAS No. 132 (revised 2003)
for the fiscal year ended December 31, 2003.

NOTE B.  MARKETABLE SECURITIES (IN THOUSANDS):

The following table summarizes the Company's marketable securities.
                                                          2003    2002
                                                          ----    ----
Corporate and municipal bonds and auction
 rate preferred stock                                   $5,956  $7,699
Medium and short term notes                                        688
                                                        ------  ------
                                                        $5,956  $8,387
                                                        ======  ======


NOTE C. VALUATION AND QUALIFYING ACCOUNTS

The allowance for doubtful accounts was increased by $10,000,
$87,000 and $250,000 in 2003, 2002 and 2001, respectively, by
charges to costs and expenses.  The Company wrote off uncollectible
accounts, net of recoveries, of $15,000, $213,000 and  $109,000 in
2003, 2002 and 2001, respectively.

NOTE D.  INVENTORIES (IN THOUSANDS):
                                                          2003    2002
                                                          ----    ----
Finished and in process                                 $2,172  $2,273
Materials and purchased parts                              815   1,414
                                                        ------  ------
                                                        $2,987  $3,687
                                                        ======  ======

NOTE E.  PROPERTY, PLANT AND EQUIPMENT, NET (IN THOUSANDS):
                                                          2003    2002
                                                          ----    ----
Machinery and equipment                                 $2,476  $2,279
Furniture and fixtures                                   2,131   2,220
                                                         -----  ------
                                                         4,607   4,499
Less allowances for depreciation                         3,520   3,184
                                                         -----  ------
                                                        $1,087  $1,315
                                                        ======  ======

Due to the continuing downturn in the domestic telecommunication
equipment market, the Company recorded in 2002, based on estimated
cash flows, a provision of $275,000 for the impairment of certain
demonstration and test equipment.

NOTE F.  OTHER NON-CURRENT LIABILITIES (IN THOUSANDS):
                                                          2003    2002
                                                          ----    ----
Accrued officers' supplemental pension                  $  419  $  466
Accrued deferred compensation                              232     254
Deferred directors' fees                                   411     332
Accrued pension                                            664     777
Accrued postretirement benefit                              11     856
                                                        ------  ------
                                                         1,737   2,685
Less current portion                                       263     272
                                                        ------  ------
                                                        $1,474  $2,413
                                                        ======  ======

NOTE G.  DEBT AND CREDIT ARRANGEMENTS

Dacon Electronics Plc's, a foreign subsidiary, bank line of credit
expired in 2003.  During 2003 and 2002, no amounts were borrowed
under this facility.

                                                                  2002
                                                                  ----
Installment finance agreements, interest at 8% to 11% per
           annum expiring through 2003                             $26
           Less current maturities of debt                          26
                                                                   ---
                                                                   $ 0
                                                                   ===

Interest of $11,000, $19,000 and $19,000 was paid in 2003, 2002 and
2001, respectively.

NOTE H.  INCOME TAXES

At December 31, 2002, consolidated retained earnings included
approximately $.4 million of retained earnings applicable to Dacon
Electronics Plc.  If the undistributed earnings were remitted, any
resulting federal tax would be substantially reduced by foreign tax
credits.

The components of the provision (benefit) for income taxes for the
years ended December 31 are as follows (in thousands):

                                                  2003    2002    2001
                                                  ----    ----    ----
Current:
      Federal                                     $    $(1,714)  $(452)
      Foreign
      State                                         63      88      62
                                                  ---- -------   -----
       Total current                                63  (1,626)   (390)
                                                  ---- -------   -----

Deferred:
      Federal                                            1,817    (330)
      State                                                194     (40)
                                                  ---- -------   -----
       Total deferred                                0   2,011    (370)
                                                  ---- -------   -----
                                                  $ 63 $   385   $(760)
                                                  ==== =======   =====

The provision (benefit) for 2001 reflects a favorable adjustments to
the tax provision  of $155,000 attributable to actual amounts
differing from previously recorded estimates.

Domestic and foreign pretax income (loss) for the years ended
December 31 are as follows (in thousands):
                                                 2003     2002     2001
                                                 ----     ----     ----
Domestic operations                           $(3,482) $(5,978) $(1,609)
Foreign operations                                (68)     (81)    (956)
                                              -------  -------  -------
                                              $(3,550) $(6,059) $(2,565)
                                              =======  =======  =======

Deferred income taxes reflect the net tax effects of temporary
differences between carrying amounts of assets and liabilities for
financial reporting purposes and amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 2003 and 2002 are as
follows (in thousands):
                                                        2003        2002
                                                        ----        ----
Deferred tax liabilities                              $   85      $   78
                                                      ------      ------

Deferred tax assets:
      Inventory valuation                              1,026         906
      Accrued liabilities and employee benefits          934         856
      Accrued deferred compensation                      233         260
      Other postretirement benefits                        4         319
      Federal operating loss carryforward
       expiring in 2019                                1,257
      Separate return federal operating loss
       carryforwards expiring in 2008 and 2009           445         445
      Other                                              207         162
                                                      ------      ------
       Total deferred tax assets                       4,106       2,948
      Valuation allowance                             (4,021)     (2,870)
                                                      ------      ------
                                                          85          78
                                                      ------      ------
            Net deferred tax assets                   $    0      $    0
                                                      ======      ======

Valuation allowances of $1,151,000 and $2,425,000 have been charged
to tax expense in 2003 and 2002, respectively, as the Company cannot
determine that the ultimate realization of its net deferred tax
asset is more likely than not.  Included in other accrued expenses
at December 31, 2003 and 2002 was $441,000 related to prior years'
tax expenses.

A reconciliation of the statutory federal income tax rate to the
effective tax rate on income (loss) for the years ended December 31,
is as follows:

                                                  2003    2002    2001
                                                  ----    ----    ----

Statutory federal income tax rate                (34.0)% (34.0)% (34.0)%

State income taxes, net of federal tax benefit     1.8     0.6     0.5
Lower foreign tax rate                             0.7     0.5     8.3
Nontaxable interest income                                (0.3)   (2.9)
Goodwill amortization                             (0.8)   (0.4)    3.4
Tax adjustment                                                    (6.0)
Valuation allowance                               33.2    40.0
Other                                              0.9             0.7
                                                  ----    ----    ----
                                                   1.8%    6.4%  (30.0)%

NOTE I.  OTHER (INCOME) EXPENSE, NET (IN THOUSANDS):

                                                Year Ended December 31,
                                                  2003    2002    2001
                                                  ----    ----    ----
Interest expense                               $    26   $  36   $  55
Interest income                                   (184)   (242)   (559)
Settlement gain in plan termination               (849)
                                               -------   -----   -----
                                               $(1,007)  $(206)  $(504)
                                               =======   =====   =====

NOTE J. COMMITMENTS AND CONTINGENCIES

Leases.  Total rental expense amounted to $364,000 in 2003, $423,000
in 2002 and $472,000 in 2001.  Future annual payments for long-term
noncancellable leases for each of the five years in the period
ending December 31, 2008 are approximately
$444,000, $425,000, $304,000, $182,000 and $152,000, respectively,
and $0 thereafter.

Pension Plan.  The Company and its domestic subsidiaries have a
defined benefit pension plan covering substantially all employees.
The benefits are based on years of service and the employee's
compensation.   No additional service cost benefits were earned
subsequent to June 30, 1994.  The Company's funding policy is to
contribute amounts to the plan sufficient to meet the minimum
funding requirements set forth in the Employee Retirement Income
Security Act of 1974, plus such additional amounts as the Company
may determine to be appropriate from time to time.  The components
of net cost of the plan for the years ended December 31 are as follows
(in thousands):
                                                  2003    2002    2001
                                                  ----    ----    ----
Interest cost on projected benefit obligation     $106    $120    $116
Actual (return)/loss on plan assets               (109)     99      99
Net amortization and deferral                       63    (167)   (184)
Settlement loss                                     58
                                                  ----    ----    ----
      Net periodic pension cost                   $118    $ 52    $ 31
                                                  ====    ====    ====

The following table sets forth the plan's funded status and the
accrued pension liability recognized in the Company's Consolidated
Balance Sheets at December 31 (in thousands):
                                                          2003    2002
                                                          ----    ----
Projected benefit obligation for services rendered
 to date
  Beginning of year                                     $1,737  $1,667
      Loss (gain) due to change in estimates                50      61
      Interest cost                                        106     120
      Less benefits paid                                  (404)   (111)
                                                        ------  ------
  End of year                                            1,489   1,737
                                                        ------  ------

Plan assets at fair value
  Beginning of year                                        960   1,009
      Actual return on plan assets                         109     (99)
      Contribution                                         160     160
      Less benefits paid                                  (404)   (110)
                                                        ------  ------
  End of year                                              825     960
                                                        ------  ------
Plan assets less than projected benefit obligation        (664)   (777)
Unrecognized net loss (gain)                               277     348
Minimum pension liability adjustment                      (277)   (348)
                                                        ------  ------
Accrued pension liability (included in other
 non-current liabilities)                               $ (664) $ (777)
                                                        ======  ======

The discount rates used in determining the projected benefit
obligation were 6.25% in 2003 and 6.75% in 2002 .  The expected
long-term rate of return on plan assets used in determining the net
periodic pension cost was 6.5% in 2003 and 7% in 2002.  In
determining the expected return on plan assets, the Company
considers the relative weighting of plan assets, the historical
performance of total plan assets and individual assets categories
and economic and other indicators of future performance.  The
Company may also consult with other professionals in developing
expected returns.  The plan's weighted-average asset allocation at
December 31, 2003 and 2002 and target allocation for 2004 by asset
category, are as follows:

       Asset Category                    2004 Target
       --------------                    Allocation     2003    2002
                                         -----------    ----    ----
Equity Securities                         45-60%          60%     39%
Debt Securities                           30-45%          33%     41%
Cash and cash equivalents                  5-15%           7%     20%

The Company intends to contribute $143,000 in 2004 to this plan.

401(k) Retirement Plan.  The Company has a defined contribution plan
covering substantially all domestic employees. The Company's
contribution, until June of 2003 was based upon the participants'
contributions.  In June of 2003, the Company suspended its
contribution.  The expense was $23,000, $52,000 and $54,000 in 2003,
2002 and 2001, respectively.

Officers' Supplemental Pension Plan.  The Company has an unfunded,
noncontributory defined benefit pension plan covering certain
retired officers.

The components of net pension cost of the plan for the years ended
December 31 are as follows (in thousands):
                                                  2003    2002    2001
                                                  ----    ----    ----
Interest cost on projected benefit obligation      $24     $27     $30
Amortization of actuarial gains                     (3)     (3)     (3)
                                                   ---     ---     ---
     Net periodic pension cost                     $21     $24     $27
                                                   ===     ===     ===

The following table sets forth the plan's status and the accrued
pension liability recognized in the Company's Consolidated Balance
Sheets at December 31 (in thousands):
                                                          2003    2002
                                                          ----    ----
Projected benefit obligations
  Balance at beginning of period                          $391    $433
      Interest expense                                      24      27
      Less benefits paid                                   (68)    (69)
                                                          ----    ----
  Balance at end of period                                 347     391
Unrecognized net gain                                       72      75
                                                          ----    ----
Accrued pension liability (included in other
 non-current liabilities)                                 $419    $466
                                                          ====    ====
The discount rate used in determining the projected benefit
obligation was 6.75% for all years presented.  All participants are
retired and receiving benefits under the Plan and therefore future
increases in compensation are not applicable.

The Company expects to contribute $69,000 in 2004 to this plan.

Other Postretirement Benefit Plans.  In addition to the Company's
pension plans, the Company has a contributory, unfunded defined
benefit plan providing certain health care benefits for domestic
employees who retired prior to March 31, 1996.  In 2003 the Company
terminated this plan effective December 31, 2003.  The assumed rate
of increase in the per capita cost of covered benefits used for 2002
was 9.0% decreasing to 5% after 8 years.    The weighted average
discount rates used in determining the net periodic postretirement
benefit cost and accumulated benefit obligation was 6.75% in 2002.

The following sets forth the plan's status and accrued
postretirement benefit liability recognized in the Company's
Consolidated Balance Sheets at December 31 (in thousands):

                                                                   2002
                                                                   ----
Actuarial present value of accumulated postretirement benefit
obligation:
  Balance at beginning of period                                   $657
      Interest cost                                                  47
      Actuarial (gain)/loss                                           8
      Benefits paid, net                                            (23)
                                                                   ----
                                                                    689
Unrecognized net gain                                               167
                                                                   ----
Accrued postretirement benefit liability (included in other
non-current liabilities)                                           $856
                                                                   ====

The components of postretirement benefit cost for the years ended
December 31, are as follows (in thousands):

                                                  2003    2002    2001
                                                  ----    ----    ----
      Interest cost                              $  45     $47     $47
      Net amortization                              (9)    (11)    (11)
      Settlement gain                             (849)
                                                 -----     ---     ---
       Net periodic cost                         $(813)    $36     $36
                                                 =====     ===     ===

The net benefits paid were $32,000, $23,000 and $18,000 for 2003,
2002 and 2001, respectively.

Deferred Compensation. At December 31, 2003 and 2002, the liability
relating to a deferred compensation arrangement between the Company
and a former director and officer of the Company was $232,000 and
$254,000, respectively.  The Company expects to make payments in
2004 totaling $40,000 under this contract.

NOTE K.  STOCK PLANS

The 1990 Stock Option Plan provides for the grant, at fair market
value on the date of grant, of nonqualified stock options and
incentive stock options. Options generally become exercisable in
three equal annual installments on a cumulative basis commencing six
months from the date of grant and expire five years (ten years for
awards granted after 1999) after the date granted.

The Company also has the 1967 Employee Stock Purchase Plan which
provides for the grant to purchase shares at 85% of the fair market
value of the stock on the date offered. Generally, rights to
purchase shares under this plan expire 12 months (maximum 27 months)
after the date of grant.  For each of the three years in the period
ended December 31, 2003, no grants were granted, exercised or
cancelled.  At December 31, 2003, there were no grants outstanding
and there were 52,478 shares available for future grant.

The Company also has a time accelerated restricted stock plan
("Restricted Stock Plan") which provides for the award of shares to
key employees; generally, the awards vest in five equal annual
installments commencing two years after the date of the award.
Vesting may be accelerated based on the achievement of certain
financial performance goals.

In 2002, the company granted to key employees the right to receive
395,000 common shares which vest on January 2, 2006.  Such rights
are subject to immediate vesting in the event of change of control
of the Company and pro-rata vesting in the event of death or
involuntary termination of employment for reasons other than cause.
The total value of the rights at the date of grant was $612,000 and
was based on the market price of $1.55 per share. $150,000 was
charged to operations in 2002 related to this grant.

The Directors' Stock Option Plan provides for an annual grant of
options to non-employee officers and directors.  This plan provides
for the automatic award of options to purchase 3,000 shares of
Common Stock at the fair market value at the date of grant to each
person who is a participant on August 1 of each year and pro-rated
awards in certain cases.  The awards expire five years (ten years
for awards granted after 2000) after the date granted.  In 2002, the
plan was amended to provide for grant on November 9, 2002 of options
to purchase 5,500 shares for each participant.

Share information pertaining to these plans is as follows:
                                      1990    Restricted   Directors'
                                     Option     Stock        Option
                                      Plan      Plan          Plan
                                     ------   ----------   ----------

Outstanding at January 1, 2001      694,876       67,040       47,000
      Granted                       248,500       76,500       18,250
      Cancelled or expired           (2,302)
      Vested                                    (12,330)
      Exercised                     (85,024)
                                  ---------      -------      -------
Outstanding at December 31, 2001    856,050      131,210       65,250
      Granted                       315,500      145,000       51,000
      Cancelled or expired         (131,225)                  (15,000)
      Vested                                     (17,530)
      Exercised
                                  ---------      -------      -------
Outstanding at December 31, 2002  1,040,325      258,680      101,250
      Granted                       248,500      103,187       36,000
      Cancelled or expired         (151,225)                  (12,000)
      Vested                                     (32,830)
      Exercised                      (3,000)
                                  ---------      -------      -------
Outstanding at December 31, 2003  1,134,600      329,037      125,250
                                  =========      =======      =======
Available for future grant            3,797            0       62,250
                                  =========      =======      =======





The exercise price for options granted in 2001 was $5.00, for
options granted in 2002 was $1.55 and for options granted in 2003
was $2.20.  The weighted average exercise price for the options
outstanding under the Option Plan is $4.67 with expiration dates
ranging from 2004 to 2012. Options were exercised under the Option
Plan at weighted average exercise prices of $2.46 and $1.55in  2001
and 2003, respectively. Shares exercisable under the Option Plan and
weighted average exercise price at December 31, 2001, 2002 and 2003
were 622,903 and $6.82, 580,892 and $7.32 and 681,764 and $6.53,
respectively.  The weighted average remaining lives for options
outstanding at December 31, 2001, 2002 and 2003 were 5.4, 6.6 and
7.3 years, respectively.

Under the Restricted Stock Plan compensation expense was $228,000,
$220,000 and $206,000 in 2003, 2002 and 2001, respectively.

The exercise price for options granted under the Directors' Stock
Option Plan in 2001 ranged from $5.35 to $6.10, for options granted
in 2002 ranged from $1.45 to $2.00 and for options granted in 2003
was $2.11.  The weighted average exercise price for the options
outstanding under the plan is $4.15 with expiration dates ranging
from 2004 to 2013.  No options have been exercised.  Shares
exercisable at December 31, 2001, 2002 and 2003 were 47,000, 62,250
and 101,250, respectively.  The weighted average remaining lives for
options outstanding at December 31, 2001, 2002 and 2003 were 4.6,
7.0 and 7.6 years, respectively.

NOTE L.  CUMULATIVE OTHER COMPREHENSIVE LOSS

Cumulative other comprehensive loss consists of the following at
December 31 (in thousands):
                                                          2003    2002
                                                          ----    ----
Cumulative translation adjustment                         $ 50   $ (79)
Minimum pension liability net of tax of $129 and $129     (148)   (219)
                                                          ----   -----
                                                          $(98)  $(298)
                                                          ====   =====

NOTE M.  RELATED PARTY TRANSACTIONS

The Company has advanced amounts to officers primarily for personal
income taxes related to various stock option plans.  The amounts
outstanding at December 31, 2003 and 2002 of $1,931,000 and
$1,906,000 include interest accrued on the advances.  This
indebtedness bears interest at rates approximating market rates and
is payable upon demand.

NOTE N.  OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREAS

The Company operates in two segments of the voice processing
industry.  In the United States, the Company designs, manufactures
and sells equipment for use in telephone central offices.  In Europe
(United Kingdom), the Company distributes equipment for use in
customers' premises. Information about the Company's operations by
segment and geographic area for the years ended December 31, is as
follows (in thousands):

                                                 2003     2002     2001
                                                 ----     ----     ----
Net sales
      United States                           $ 5,096  $ 5,536  $12,977
      Europe                                    5,161    5,763    5,898
                                              -------  -------  -------
                                              $10,257  $11,299  $18,875
                                              =======  =======  =======
Operating profit (loss)
      United States                           $(3,047) $(5,115) $  (813)
      Europe                                      (68)     (75)    (950)
           Intercompany eliminations               11       19       23
                                              -------  -------  -------
                                               (3,104)  (5,171)  (1,740)
General corporate expenses                      1,390    1,094    1,329
Other (income) expense, net                    (1,007)    (206)    (504)
                                              -------  -------  -------
Income (loss) before income taxes             $(3,487) $(6,059) $(2,565)
                                              =======  =======  =======
Total assets
      United States                           $16,035  $20,164  $26,153
      Europe                                    2,856    2,655    2,444
           Intercompany eliminations                        (7)     (24)
                                              -------  -------  -------
                                              $18,891  $22,812  $28,573
                                              =======  =======  =======
Long-lived assets
      United States                           $ 1,153  $ 1,485  $ 1,788
      Europe                                      395      473      600
           Intercompany eliminations                                (16)
                                              -------  -------  -------
                                              $ 1,548  $ 1,958  $ 2,372
                                              =======  =======  =======

Expenditures for long-lived assets
      United States                           $   180  $   570  $   756
      Europe                                       26       53      130
                                              -------  -------  -------
                                              $   206  $   623  $   886
                                              =======  =======  =======

Depreciation and amortization
      United States                           $   502  $   588  $   504
      Europe                                      110      165      490
           Intercompany eliminations                       (10)      (7)
                                              -------  -------  -------
                                              $   612  $   743  $   987
                                              =======  =======  =======

Gross profit margin on intercompany transfers are comparable to
sales to third parties.  The United States operations had net sales
of $1.1 million, $1.4 million and  $7.5 million in 2003, 2002 and
2001, respectively, to one major customer and sales of $2.8 million,
$1.6 million and $1.9 million in 2003, 2002 and 2001 to another
major customer.  The European operations had sales of $3.0 million,
$2.2 million and $2.8 million in 2003, 2002 and 2001, respectively,
to one customer.

Item 9.  Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

       None.

Item 9a.  Controls and Procedures

Quarterly Evaluation.  The Company's management carried out an
evaluation as of December 31, 2003 of the effectiveness of the
design and operation of the Company's "disclosure controls and
procedures," which the Company refers to as the Company's disclosure
controls.  This evaluation was done under the supervision and with
the participation of Company management, including the Chief Executive
Officer and Chief Financial Officer.  Rules adopted by the Commission
require that the Company present the conclusions of the Chief Executive
Officer and Chief Financial Officer about the effectiveness of the
Company's disclosure controls as of the end of the period covered by
this annual report.

CEO and CFO Certifications.  Included as Exhibits 31.1 and 31.2 to this
Annual Report on Form 10-K are forms of "Certification" of the Company's
Chief Executive Officer and Chief Financial Officer.  The forms of
Certification are required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002. This section of the Annual Report on Form
10-K is the information concerning the evaluation referred to in the
Section 302 certifications.  This information should be read in
conjunction with the Section 302 certifications for a more complete
understanding of the topics presented.

Disclosure Controls and Procedures and Internal Control over Financial
Reporting.  Disclosure controls and procedures are designed with the
objective of ensuring that information required to be disclosed in the
Company's reports filed or submitted under the Exchange Act, such as
this Annual Report on Form 10-K, is recorded, processed, summarized and
reported within the time periods specified in the Commission's rules
and forms.  Disclosure controls and procedures are also designed with the
objective of ensuring that such information is accumulated and
communicated to Company management, including the Company's Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.

Internal control over financial reporting is a process designed by, or
under the supervision of, the Company's Chief Executive Officer and Chief
Financial Officer, and effected by the Company's Board of Directors,
management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:

        pertain to the maintenance of records that in reasonable detail
        accurately and fairly reflect the transactions and dispositions
        of the Company's assets;

        provide reasonable assurance that transactions are recorded as
        necessary to permit preparation of financial statements in
        accordance with generally accepted accounting principles, and
        that the Company's receipts and expenditures are being made only
        in accordance with authorizations of management or the Company's
        Board; and

        provide reasonable assurance regarding prevention or timely
        detection of unauthorized acquisition, use or disposition of the
        Company's assets that could have a material adverse effect on
        the Company's financial statements.

Limitations on the Effectiveness of Controls.  Management, including the
Company's Chief Executive Officer and Chief Financial Officer, do not
expect that the Company's disclosure controls and procedures or internal
control over financial reporting will prevent all errors and all fraud.
A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of
fraud, if any, within the company have been detected.  These inherent
limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by
management's override of the control.  The design of any system of
controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or
procedures may deteriorate.  Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may
occur and not be detected.

Conclusions.  Based upon the evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that, as of
December 31, 2003 and subject to the limitations noted above, the
Company's disclosure controls and procedures were effective at the
reasonable assurance level to ensure that material information relating
to the Company and its consolidated subsidiaries is made known to
management, including the Company's Chief Executive Officer and Chief
Financial Officer.

During the three months ended December 31, 2003, there were no
significant changes in the Company's internal control over financial
reporting that has materially affected, or are reasonably likely to
materially affect, the Company's internal control for financial reporting.


                               PART III

Item 10.  Directors and Executive Officers of the Registrant

      The information appearing under the captions "Information
Concerning Nominees", "Qualification of Audit Committee Members",
"Code of Ethics", and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement for the annual meeting of
stockholders to be held on May 13, 2004 is incorporated herein by
reference.

      The identification of the executive officers of the Company
and their positions with the Company and ages as of March 1, 2004 is
set forth under the caption Executive Officers of the Company in
Part I of this Annual Report on form 10-K.

Item 11.   Executive Compensation

       The information on executive compensation set forth under the
caption Executive Compensation in the Proxy Statement for the annual
meeting of stockholders to be held on May13, 2004 is incorporated
herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and
Management

       (a) and (b)  Security ownership of certain beneficial owners
and management set forth under the caption Security Ownership in the
Proxy Statement for the annual meeting of stockholders to be held on
May 13, 2004 is incorporated herein by reference.

       (c) Changes in Control.  None.

Item 13.   Certain Relationships and Related Transactions

       The information on certain relationships and related
transactions set forth under the caption Certain Relationships and
Related Transactions in the Proxy Statement for the annual meeting
of stockholders to be held on May 13, 2004 is incorporated herein by
reference.

Item 14.   Principal Accountant Fees and Services

       The information on fees charged by the principal account set
forth under the caption Independent Auditors' Fees in the Proxy
Statement for the annual meeting of stockholders to be held on May
13, 2004 is incorporated herein by reference.

                               PART IV

Item 15.   Exhibits, Financial Statements, Schedules and Reports on
Form 8-K

 (a)(1) and (2) and (d)  The response to this portion of Item 15 is
submitted as a separate section beginning on page 31 of this Annual
Report on Form 10-K.

 (a)(3) and (c)  The response to this portion of Item 15 is
submitted as a separate section beginning on page 31 of this Annual
Report on Form 10-K.

 (b)  There were two reports filed on Form 8-K during the fourth
quarter of 2003.  On November 14, 2003, the Company filed a current
report on Form 8-K pursuant to Item 9 (Regulation F Disclosures) to
furnish a press release reporting results of the third quarter of
2003.  On November19, 2003, the Company filed a current report on
Form 8-K pursuant to Item 4 (Change of Registrant's Certifying
Accountants) to notify the Commission of the change in certifying
accountants.


                              SIGNATURES
    Pursuant to the requirements of Section 13 or 15(d) of the
Securities  and Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on March 29, 2004.

         COGNITRONICS CORPORATION
               Registrant

         by    /s/   Garrett Sullivan
              Garrett Sullivan
              Treasurer

 Pursuant to the requirements of the Securities Exchange Act of
1934,  this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March
29, 2004.


 Signature                                                 Title

Chief Executive Officer:


 /s/ Brian J. Kelley
 -------------------                              President and Chief
      Brian J. Kelley                             Executive Officer


Chief Financial and Accounting Officer:


 /s/ Garrett Sullivan
---------------------                             Treasurer
      Garrett Sullivan


A Majority of the Board of Directors:


 /s/ John T. Connors
--------------------                              Director
      John T. Connors


 /s/ Jack Meehan
----------------                                  Director
      Jack Meehan



 /s/ William A. Merritt
-----------------------                           Director
      William A. Merritt


 /s/ William J. Stuart
----------------------                            Director
      William J. Stuart



Form 10-K -- Item 15 (a) (1) and (2) and (d)

 (a)     (1)  Financial Statements

The following financial statements of the Company are included in
Item 8.

Financial Statements Covered by Reports of Independent Auditors:  PAGE

Reports of Independent Auditors  . . . . . . . . . . . . . . . . . .13

Consolidated Balance Sheets, December 31, 2003 and 2002. . . . . . .15

Consolidated Statements of Operations and Comprehensive Income
(Loss) for each of the three years in the period ended
   December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . .16

Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 2003. . . . . . . . . .16

Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2003. . . . . . . . . . . . . . . .17

Notes to Consolidated Financial Statements . . . . . . . . . . . . .18


     (2) and (d) Financial Statement Schedules

Schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the
information has been included in the Company's financial statements
and, therefore, have been omitted.


                        Item 15(a)(3) and (c)

                          INDEX TO EXHIBITS

Exhibit

3.1      Certificate of Incorporation as filed on January 2, 1962
(Exhibit 3-1-A to Form S-1 Registration Statement No. 2-27439
 and incorporated herein by reference).

3.2      Amendment, dated June 28, 1965 (Exhibit 3-1-B to Form S-1
         Registration Statement No. 2-27439 and incorporated herein
         by reference).

3.3      Amendment, dated October 3, 1966 (Exhibit 3-1-C to Form S-1
         Registration Statement No. 2-27439 and incorporated herein
         by reference).

3.4      Amendment, dated October 30, 1967 (Exhibit 3-1-D to Form
         S-1 Registration Statement No. 2-27439 and incorporated
         herein by reference).

3.5      Amendment, dated July 27, 1981 (Exhibit 3.5 to Annual
         Report on Form  10-K for the fiscal year ended December 31,
         1983 and incorporated herein by reference).

3.6      Amendment, dated September 27, 1984 (Exhibit 3.6 to Annual
         Report on Form 10-K for the fiscal year ended December 31,
         1984 and incorporated herein by reference).

3.7      Amendment dated June 13, 1988 (Exhibit 3.7 to Annual Report
         on Form 10-K for the fiscal year ended December 31, 1988
         and incorporated herein by reference).

3.8      Amendment dated November 3, 1994 (Exhibit 3.8 to Annual
         Report on Form 10-K for the year ended December 31, 1994
         and incorporated herein by reference).

3.9      Amendment, dated July 25, 2000 (Exhibit 3.1 to Quarterly
         Report on Form 10-Q for the period ended June 30, 2000 and
         incorporated herein by reference)

Exhibit

3.10     By-laws of the Company (Exhibit 3.9 to Annual Report on
         Form 10-K for the year ended December 31, 1994 and
         incorporated herein by reference).

4.       Specimen Certificate for Common Stock (Exhibit 4-1 to Form
         S-1 Registration Statement No. 2-27439 and incorporated
         herein by reference).

10.1     1990 Stock Option Plan, as amended (Exhibit 10.1 to
         Quarterly Report on Form 10-Q for the period ended June 30,
         2003 and incorporated herein by reference).

10.2     Lease, dated April 30, 1993, between The Danbury Industrial
         Corporation, landlord, and Cognitronics Corporation, tenant
         (Exhibit 10.3 to Annual Report on Form 10-K for the year
         ended December 31, 1993 and incorporated herein by reference).

10.3     Lease amendment, dated as of January 27, 2003, between the
         Danbury Industrial Corporation and Cognitronics Corporation
         (Exhibit 10.3 to Annual Report on Form 10-K for the year
         ended December 31, 2002 and incorporated herein by reference).

10.4     Form of Indemnity Agreement, dated October 27, 1986,
         between each Director (with equivalent form for each
         Officer) and Cognitronics Corporation (Exhibit 10.7 to
         Annual Report on Form 10-K for the year ended December 31,
         1986 and incorporated herein by reference).

10.5     Supplemental Pension Plan for Officers, as amended November
         2, 1993 (Exhibit 10.6 to Annual Report on Form 10-K for the
         year ended December 31, 1993 and incorporated herein by
         reference).

10.6     Cognitronics Corporation Restricted Stock Plan (Exhibit
         10.2 to Quarterly Report on Form 10-Q for the period ended
         June 30, 2003 and incorporated herein by reference).

10.7     Form of Executive Severance Agreement between certain
         officers and Cognitronics Corporation  ( Exhibit 10.8 to
         Annual Report on Form 10-K for the year ended December 31,
         1997 and incorporated herein by reference).

10.8     Addendum to Executive Severance Agreement between certain
         officers and Cognitronics Corporation (Exhibit 10.8 to
         Annual Report on Form 10-K for the year ended December 31,
         1999 and incorporated herein by reference).

10.9     The Directors' Stock Option Plan, as amended  (Exhibit 10.3
         to Quarterly Report on form 10-Q for the period ended June
         30, 2003 and incorporated herein by reference).

21.      List of subsidiaries of the Company as of December 31, 2003
         (attached as Exhibit 21 to this Annual Report on Form 10-K).

23.1     Consent of Independent Auditors, dated March 29, 2004
         (attached as Exhibit 23 to this Annual Report on Form 10-K).

23.2     Consent of former Independent Auditors dated March 29, 2004
         (attached as Exhibit 23.2 to this Annual Report on Form 10-K).

31.1     Certification of Chief Executive Officer Pursuant to Rule 13a-14
         as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
         2002 (attached as exhibit 31.1 to this Annual Report on Form
         10-K).

31.2     Certification of Chief Financial Officer Pursuant to Rule 13a-14
         as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
         2002 (attached as exhibit 31.2 to this Annual Report on Form
         10-K).

32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C.
         Section 1350 as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002 (attached as exhibit 32.1 to this
         Annual Report on Form 10-K).

32.2     Certification of Chief Executive Officer pursuant to 18 U.S.C.
         Section 1350 as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002 (attached as exhibit 32.1 to this
         Annual Report on Form 10-K).








 Copies of the Exhibits to this Annual Report on Form 10-K are
available upon written request to the Secretary of the Company at 3
Corporate Drive, Danbury, CT 06810-4130 and payment of $35.00 for a
complete set of the Exhibits or $.25 per page for any part thereof
(minimum $5.00).